Nationwide Express Courier Services Bhd

Hey folks,

This afternoon, I was at Nationwide Express Courier Services Bhd (Nationwide Express) in Shah Alam, Selangor, attending its new product launch, the first time this year.

Nationwide Express is a courier service and logistics business company which operates trucking, air freight, sea freight and warehousing.

Nationwide Express network include 180 branches, agents and drop-off centers in Malaysia, Singapore and Brunei. Currently, it delivers over 35,000 packages daily for both multinationals and local corporate companies.

The managing director is Cik Rozilawati Basir, 43, who was re-designated to the current position effective April 2, 2014. In addition, former chief justice of Malaysia Tun Zaki Azmi was appointed the chairman on the same year.

Last year, its chief executive officer Ahmad Najmi bin Mahfodz resigned, due to the expiry of contract of employment.

Rozilawati has a deemed interest in Nationwide Express via her private vehicle, BHR Enterprise Sdn Bhd. Bloomberg data showed that BHR Enterprise has 54.78% controlling stake in Nationwide Express.

It also has 53.33% interest in Kumpulan FIMA Bhd.

Rozilawati is the son of the late Tan Sri Basir Ismail, the former chairman of Malaysian Palm Oil Board who was called to God in 2007.

Nationwide Express plunged to red in financial year 2013, after reporting a loss of RM2.92 million with revenue of RM99.04 million.

Let's look at the financial highlights below:

Financial Year	Revenue (RM million)	Net profit / (net loss) in RM million
2013	99.036	(2.641)
2012	96.178	2.118
2011	92.390	2.164
2010	87.520	3.852
2009	88.432	3.260

Source: Annual Report 2013

The company is scheduled to announce its fourth quarter of financial year 2014 (4QFY14) next month. From there, we can trace how well the company performed so far.

Anyway, today Nationwide Express launched its new logistic product to cater the growing needs of its customers to consign temperature sensitive and cold-chain shipment. The product is called "pharmaceutical dedicated delivery" or in short, PDD.

To put simply, the company has spent approximately RM5 million to purchase 21 trucks, of which 19 trucks are air-conditioned and another 2 trucks are chilled. The trucks are capable of handling chilled-delivery of medical supplies such as vaccine; and the temperatures it can handle are:-

• room temperature - between 24°C to 25°C
• chilled delivery - between 0°C to 8°C

The product was launched by Datin Paduka Siti Sa'diah Sheikh Bakir, former chief executive of KPJ Healthcare Bhd.

I find Datin to be a very humble lady, who is very patient and media-friendly.

Datin also said that she really admired Rozilawati's father whom she said to be "an excellent mentor, with firm management footing".

(the photographer made me look like a big giant!)
From Left to Right: Cik Rozilawati Basir, Datin Paduka Siti Sa'diah Sheikh Bakir, and Puan Sri Hamidah (mother of Rozilawati)

Labuan IBFC

Hey people,

Yesterday, Labuan International Business and Financial Centre (Labuan IBFC) hosted a media tutorial session at Le Meridien Hotel, Kuala Lumpur.

It is basically a sharing session to "educate" and "inform" the media of who they are and what they do.

For those who do not know, Labuan is an island located in Sabah, and most financial folks would associate Labuan as an offshore financial services, --- which they partly are, but more than just that.

In the peninsular Malaysia for instance, we have Kuala Lumpur as the country's financial center, but for East Malaysia, Labuan (or rather, Labuan IBFC) is touted as the financial center over there. Some associated Labuan with other offshore financial services center such as Cayman Island in the Bristish Virgins Island.

In the peninsular Malaysia, Sabah and Sarawak (should I say, mainland?), nearly 99% of financial services are regulated by the central bank, or fondly known in Malaysia language as Bank Negara Malaysia (BNM).

Because Labuan is an island (and though it is located in Malaysia), it has its own financial authority that regulate all financial services there. The authority is known as Labuan Financial Services Authory which is known as LFSA.

Labuan IBFC was established on Oct 1, 1990 with a purpose to develop the economy of Labuan and its vicinity area. It is basically the marketing arm of LFSA.

There are many foreign companies and banks that are in Labuan and you probably don't normally hear their names in peninsular Malaysia. That may be due to either lack of promotional activity or secrecy in operations.

Nevertheless, many companies were established and incorporated due to (a) lesser restrictions and (b) better incentives and benefits.

Below is a presentation document that was provided by Labuan IBFC. Please go through the slides to understand more, and if you have doubts, please contact them directly.

You may download the presentation file here.

Some relevant website that you may go into include:

• Labuan IBFC - www.labuanibfc.com
• Labuan FSA - ww.lfsa.gov.my

Cycle & Carriage Bintang Bhd

Hello folks,

This morning, I attended the 46th annual general meeting (AGM) of Cycle & Carriage Bintang Bhd at Concorde Hotel, Kuala Lumpur.

Of course, the press was not allowed into the meeting, and so I patiently waited outside for the meeting to last two hours later -- only to be told that the directors declined to answer any questions by the press.

And by the way, I am the only press that was present there.

Now, let's talk a bit about this company. Before I do that, let me make it loud and clear that I am writing this fairly without favouring any party. I shall only state relevant facts, and make fair comment.

After all, every public-listed companies are accountable to their shareholders, and it is the responsibility of a public company to maximize return to their shareholders.

Who is Cycle & Carriage Bintang Bhd (CCB)?

According to its website (www.ccb.com.my):

Today, CCB is still principally involved in retailing of Mercedes-Benz with unmatched record of new vehicle sales, servicingToday, CCB is still principally involved in retailing of Mercedes-Benz with unmatched record of new vehicle sales, servicing of vehicles and sales of vehicle parts & accessories via its wide network of dealership in Klang Valley, Ipoh,Penang and Johor Bahru. CCB captures over 40% of the market share for new vehicle sales and serviced close to 70% of the Mercedes-Benz sold in the market.

Who Owns CCB?

According to its Annual Report 2013 (page 75), there are two substantial shareholders:-

• Jardine Cycle & Carriage Ltd - 59.10%
• Employees Provident Fund - 6.54%

Financial Highlights

Let us have a look at its financial performance for the year 2013 -- this was announced on Feb 21, 2014 to Bursa Malaysia (and the financial information below is not meant to be exhaustive):-

Item/Year	2013	2012	Percentage Change
Revenue	RM 644.976 million	RM656.192 million	2%
Net profit attributable to shareholders	RM 4.238 million	RM 16.163 million	-74%
Earnings per share	4.21 sen	16.04 sen	-74%
Dividend per share	0 (nil)	5 sen	-100%

Source: Annual Report 2013

What can we gather from the above table? Allow me to summarize it for you:-

1. Revenue declined by 2%. If you look at the number presented, revenue is quite okay, I suppose. In the range of hundred millions. Good revenue there, compared to other company.
2. Net profit - this is the most worrying. Net profit plunged 74% to RM4.238 million, despite having more than half-a-million ringgit of revenue.
3. As net profit tumbled, so does the earnings per share.
4. And there is no dividend declared by the company for the financial year ended Dec 31, 2013.

What I See

Actually, what I think is irrelevant and immaterial because I do not have any share in this company. But if I am an investor, my biggest question is -- why has your performance dropped significantly?

To be fair, chairman Alexander Newbigging in the Annual Report 2013 attributed the poor performance to tough trading environment:

The Group experienced an extremely difficult trading environment in 2013. Competition in the crowded premium segment increased, leading to heavy discounting which had an adverse impact on profitability.

He also said that the sales of Mercedes-Benz affected the performance of the group:

The group's Mercedes-Benz passenger car unit sales were flat, although the A-class launched in June 2013 was well received by the market. The remainder of the Mercedes-Benz model range, however, faced severe challenges due to new competitive products and aggressive pricing in the market. The situation was aggravated by key Mercedes-Benz models approaching the end of their product life cycles. The group's after-sales service performed in line with expectations in 2013.

Burning Questions

I had some many burning questions to ask, but the management team was not available for comment as they had to rush to another meeting. I had no choice but to head for the office feeling unsatisfied. The burning questions are stated below:-

1. Last year, net profit declined 74% to RM4.24 million compared to RM16.2 million in 2012. Could you explain in detail the huge decline?
2. Dividends were also not declared for financial year 2013, and I sense that shareholders were not happy with this. Could you comment?
3. How will you be affected with the introduction of national automotive policy early this year?
4. With the goods and services tax slated to be introduced next year, how will that impact your business?
5. Going forward, what is your strategy and outlook?
6. How has Bank Negara's tightening measures for credit lending affected or will affect your company?

Expenses in 2013

I must commend this company because in their annual report, they are very transparent in what they spend.

Most companies don't really put their expenses in detail and they lump it all in one category because they do not want their competitor to know the details. Some of the expenses are detailed below (note that the list below is not meant to be exhaustive and complete):

Item/Year	2013 (RM million)	2012 (RM million)
Defined contribution pension plan	3,548	3,866
Salaries, bonuses and other employee benefits costs	32,193	29,953
Utilities	2,888	2,776
Demonstration car expenses	8,776	5,602
Repairs and maintenance	2,798	2,448
Security guard expenses	940	883
Auditor’s remuneration	346	318
Director’s remuneration	338	341

Source: Annual Report 2013, (page 51)

Share Price

The company is listed in the main market of Bursa Malaysia. The share price closed at RM2.37 today.
Below is the 5-year historical price chart:

(chart courtesy of Bursa Malaysia)

Sales of Mercedes-Benz Malaysia

CCB is a dealer for Mercedes-Benz in Malaysia and the CEO for Malaysian operations is Mr Roland Folger:

Mercedez-Benz Malaysia president and chief executive officer
Roland Folger
(photo courtesy of Mercedez-Benz Malaysia)

So, we might as well track the performance of Mercedes-Benz and then compare it with CCB.

In 2013, Mercedes-Benz sold a total of 8,082 units compared to 8,081 units in 2012.

In recently, in the first quarter of financial year 2013 (1QFY14), Mercedes-Benz recorded an overall of 22% growth in sales, with a total of 2,233 units sold. The breakdown is shown as follow:

Type	1QFY14 (units)	1QFY13 (units)	% Change
Passenger Vehicle	1,676	1,211	38.4%
Commercial Vehicle	31	34	-9%
FUSO (Mitsubishi)	526	582	10%
Total	2,233	1,827	22%

Source: Mercedes-Benz Malaysia press release dated April 10, 2014

Performance for 1QFY14

Today, CCB announced to Bursa Malaysia the results of its 1QFY14. Here are some salient data to be considered:

Item/Year	1QFY14	1QFY13
Revenue	RM 186.404 million	RM 175.976 million
Profit/(loss) before tax	RM 2.583 million	RM -527,000
Net profit	RM1.697 million	RM 81,000

Source: Bursa Malaysia

If you calculate, the growth in net profit is absolutely phenomenal -- 1,995%. That is a huge growth if you compare the performance of the first quarter this year with the same corresponding period in the previous year.

Chairman Alexander Newbigging said in a statement that its total vehicle sales jump 19%, without specifying exact figures. But his statement is true too because the growth in total sales of CCB is in line with the growth in total sales of Mercedes-Benz Malaysia

Now, we can see that the company is improving. On future prospect, the chairman further expects that the competition this year will remain intense, but CCB should reap some benefits with the introduction of new models later in the year:

Despite the improved start to the year, competition is expected to remain intense in the premium car segment. However, the remainder of the year should benefit from the launch of new models.

OCBC Bank Malaysia CEO Resigns

Hello Peeps,

OCBC Bank (M) Bhd announced today that its chief executive officer (CEO) Jeffrey Chew will be leaving the bank in July this year.

In the interim, he will continue in his current role until June this year.

The bank also added that it will announce the appointment of new CEO soon.
So I guess all of us have to stay tuned!

In case you are wondering, OCBC is an acronym for Oversea-Chinese Banking Corporation Ltd, which is headquartered in Singapore, but has a presence in Malaysia, Indonesia and Greater China.

In Indonesia, the bank is known as Bank OCBC NISP, and in Malaysia, the bank offers Islamic banking products to its wholly-owned subsidiary, OCBC Al-Amin Bank Bhd.

OCBC Bank also has an insurance arm, going with the brand "Great Eastern".

In 2011 and 2012, Bloomberg Markets ranked OCBC as the world's strongest bank.

OCBC Bank is now the second largest financial services grroup in Southeast Asia by assets.

KPJ Healthcare Bhd

Hey everyone,

Today I attended a media hi-tea at Hilton Hotel Kuala Lumpur which was organized by one of the private healthcare operator in Malaysia that is listed on Bursa Malaysia, KPJ Healthcare Bhd.

The event is basically organized to appreciate the media for their continuous support through coverage as well as updating their operation and strategy for the years to come.

If you do not know, the acronym KPJ stands for "Kumpulan Perubatan Johor" or loosely translated at "Johor Medical Group".

As at 8:00 pm, Monday, April 21, 2014, Blooomberg data showed that the main shareholders of KPJ Healthcare are:-

• Johor Corporation Bhd - 45.28%
• Employees Provident Fund - 13.03%
• Lembaga Tabung Haji - 10.38%

Among senior management officers present were (the names below are not meant to be exhaustive and complete):

1. Tn. Hj. Amiruddin Satar (Mr), president and group managing director
2. Datin S. Fauziah Jamaluddin (Ms), senior general manager - group talent management
3. Mohd Johari Ismail (Mr), senior general manager - group business operation
4. Norhaizam Mohammad (Ms), senior general manager - group finance
5. Rafeah Ariffin (Ms), senior general manager - group marketing and corporate communications
6. and many, many more - I just did not had the chance to exchange business cards

Update by the President and Managing Director

The following are some of the salient points collected during the opening speech by KPJ Healthcare president and managing director:-

• KPJ Healthcare is embarking on expansion plan to open more hospitals in Malaysia. The recently opened a hospital in Rawang, and will be opening more in Pahang, Perlis, Melaka and Miri. As for the exact date, I do not want to speculate on when -- let's leave it to Mr Amiruddin to announce it soon.
• KPJ Healthcare is also taking part in the development of Iskandar Malaysia (specifically in Bandar Dato' Onn) and they are planning to open its flagship specialist hospital there in the next two years.
• Some of KPJ Healthcare's hospitals have reached their maximum capacity (i.e. not enough beds to serve their customers), and for this case they are embarking on an expansion plan especially at its KPJ Ampang Puteri Specialist Hospital and KPJ Seremban Specialist Hospital. The cost for expansion (which include upgrading work is estimated around RM50 million to RM100 million, according to Mr Amiruddin).
• As for the goods and services tax (GST) to be introduced next year, KPJ Healthcare said that it will be impacted. According to Mr Amiruddin, based on earlier announcement, the impacted item will be medical supplies (drugs, medicines etc.) which he said will be taxed 6% under the GST regime. However, detail and conclusive story on this is not finalized.
• Year-on-year, there will be an increase in cost which Mr Amiruddin expect to increase between 3% to 5%. The cost increase, he said, are due to (i) partly on GST impact, (ii) labour cost and (iii) material costs.
• On his company's outlook, Mr Amiruddin expects the company to have a year-on-year 10% growth on profit margin against revenue.
• Mr Amiruddin also touched on manpower issue -- currently, he said that the country is facing surplus of nurses, citing about 7,000 to 8,000 nurses unable to get a job. This is an issue that the industry need to address, and with KPJ Healthcare's expansion plan, it should be able to create more jobs in the long run.
• On question regarding 14% hike in doctor's fee, he said that this is timely as for more than past 10 years, doctors in Malaysia have not had their so-called 'increase' in their fees.
• Mr Amiruddin also said that KPJ Healthcare is actively working with the government to tackle dengue and cyclical disease outbreak by providing affordable healthcare to Malaysians at-large.
• He also touched on medical tourism and said that data from Malaysian Healthcare Travel Council showed that the country continue to receive influx of tourists for this purpose.
• As part of its transformation program, Mr Amiruddin added that it is embarking on cloud-based information system with IBM Malaysia to provide seamless healthcare services to more than KPJ Healthcare's 2.5 million patients.
• KPJ Healthcare chief information officer Dr Mubbashir Iftikhar said that the company is currently investing RM17 million (initial investment) on cloud-based hardware infrastructure. Currently, three of its hospitals' IT system is on cloud system. By end-2015, he targets all of KPJ Healthcare's network hospital to be on cloud-system.
• IBM Malaysia Paul Moung, who is also present yesterday added that KPJ Healthcare is the first hospital in Malaysia and possibly one of the first few in the Asean region to invest on cloud-system platform to manage medical records and hospital data.

KPJ Healthcare Financial Highlights

Year	Revenue (RM billion)	Profit Before Tax and Zakat (RM million)	Net Profit [profit after tax and minority interest, PATAMI] (RM million)
2013	2.33*	151.1*	102.5*
2012	2.10	196.9	140.0
2011	1.91	204.6	143.7
2010	1.65	168.0	118.9
2009	1.46	145.3	110.9

Source: company annual reports

*unaudited, but announced to Bursa Malaysia

KPJ Healthcare Network of Hospital Statistics

Year	Number of Hospitals
2012	22
2011	20
2010	20
2009	19
2008	19

Source: KPJ Healthcare Annual Report 2012

List of KPJ Healthcare Network of Hospitals

Country	Region	Hospital
Malaysia	Central	KPJ Ampang Puteri Specialist Hospital KPJ Damansara Specialist Hospital KPJ Selangor Specialist Hospital KPJ Tawakkal Specialist Hospital KPJ Kajang Specialist Hospital Sentosa Medical Centre KPJ Klang Specialist Hospital
	Northern	KPJ Ipoh Specialist Hospital KPJ Penang Specialist Hospital Taiping Medical Centre Kedah Medical Centre Sri Manjung Specialist Centre
	East Coast	KPJ Perdana Specialist Hospital Kuantan Specialist Hospital
	Southern	KPJ Johor Specialist Hospital KPJ Puteri Specialist Hospital KPJ Seremban Specialist Hospital Kluang Utama Specialist         Hospital KPJ Pasir Gudang Specialist Hospital
	East Malaysia	Kuching Specialist Hospital Damai Specialist Hospital KPJ Sabah Specialist Hospital Sibu Specialist Medical Centre
Indonesia	Jakarta Region	RS Medika Permata Hijau RS Medika Bumi Serpong Damai
Australia	Queensland	Jeta Gardens (Brisbane)
Bangladesh	-	Sheikh Fazilatunnessa Mujib Memorial KPJ Specialist Hospital*

Source: KPJ Healthcare Annual Report 2012

*On Nov 19, 2013, KPJ Healthcare announced to Bursa Malaysia that it has entered into an agreement to manage a hospital in Bangladesh. 

KPJ Healthcare also has a 23.37% stakes in Vejthani Hospital.

Historical Share Price

As at 5:00 pm today [Monday, April 21, 2014], data from Bursa Malaysia showed that KPJ Healthcare's share closed at RM3.25 per share. Analysts have mixed reaction on this stock, and the 'strongest' call so-far (my personal opinion, of course) was by Alliance Research on April 15, 2014 where they gave the rating "sell" with a revised target price of RM2.84.

The reason cited by the Alliance Research analyst Tan Kee Hong was:-

Accordingly, we expect KPJ’s near-term earnings growth to remain tepid as start-up losses are likely to continue to be a drag on its earnings. With earnings momentum likely to remain negative going forward, we maintain our SELL recommendation with a revised TP [target price] of RM2.84, based on 15x EV/EBITDA.

The analyst also said that currently, the following hospitals within KPJ Healthcare group are loss-making:-

1. KPJ Klang Specialist
2. KPJ Pasir Gudang
3. KPJ Rawang Specialist
4. RSM Bumi Serpong Damai

Also, earlier on March 17, 2014, Kenanga Research also gave a somewhat similar rating of "underperform" on KPJ Healthcare. The reason given, if I can summarize:-

We came back from a visit to KPJ Healthcare (KPJ) feeling less sanguine about its prospects for the next few quarters due to start-up losses from the opening of new hospitals and higher operating costs.

The target price given by Kenanga Research on March 17, 2014 was RM2.67.

Let's look at the chart shown below to appreciate the stock price:-

[screenshot taken from Yahoo! Finance on April 21, 2014 at 10:00 pm]

Tracing from the chart over the past one year, we see that the stock peaked at RM4.90 on July 25, 2013. And notice also that the stock peaked between the month of July to mid-August.

At today's hi-tea with KPJ Healthcare, the president and managing director Mr Amiruddin is very optimistic with the company's outlook. He said, and I quote him below:-

Overall, I have confidence on our economy moving forward.

This is quite a strong statement, and I foresee that he has a strong faith in the economy and performance of his company, going forward.

His view was concurred by the research report by Standard Chartered Equity Research analyst Stephen Hui dated March 14, 2014, where earlier, he gave an outperform rating on this stock (with target price of RM3.62), stating that:

We like KPJ's strong market position as Malaysia's largest private hospital operator and its defensive business model.

Of course, you have to read the entire research report to appreciate the matter more, but what I am saying is that there are two sides of the coin, and it is you who must choose which side you want to lean on to. 

There is no right or wrong and it is a matter of your own judgement when buying stock, people.

And each analysts have their own way of looking and analyzing a particular stock.

Below are the summary of research house's recommendation on this stock:

Consensus target price: RM2.65 

Research House	Date Recommended	Target Price	Rating
Standard Chartered Equity Research	April 17, 2014	RM3.62	Outperform
Alliance Research	April 15, 2014	RM2.84	Sell

Source: Bloomberg Data as at 9:00 pm, Monday, April 21, 2014

And below is consolidated rating by analysts covering this stock:-

Rating	Number of Analysts	Percentage
Buy	4	23.5%
Hold	5	29.4%
Sell	8	47.1%

Source: Bloomberg Data as at 9:00 pm, Monday, April 21, 2014

Alternative Perspective on KPJ Healthcare Financials

On another perspective on this topic, one of the senior management (I shall not name the person here) of KPJ Healthcare told me not to look at "net profit" as this could be "misleading". The person told me that of course net profit is important to shareholders because they want to know how the group performed as a whole.

The person also told me that since KPJ Healthcare is managing 25 local hospitals in Malaysia, some of the hospitals are bound to make loss. The reason for this is because the gestation period for the new hospital [to reach break-even] is normally from three to five years.

The view by the person was nonetheless concurred by CIMB Research analyst Saw Xiao Jun (together with Ivy Ng Lee Fang) in their March 12, 2014 report, where they gave a "reduce" rating with target price of RM3.12:

However, its new hospitals will incur large start-up losses and may take up to five years to break even. The losses could offset stable earnings and growth in its more established hospitals until 2016. Continued losses overseas may exacerbate its near-term earnings woes.

And in another paragraph, they added that:

We would turn more positive on KPJ if its new hospitals turn profitable earlier than expected.

And the person told me that save for the loss-making hospitals, overall, KPJ Healthcare is generally doing good as there are only four hospitals so far that are loss-making, which dragged the group's financial highlights down. The person told me that you need to wait three to five years in order for that hospital to be profitable.

Of course, the net profit that we journalists talk about is the profits after tax and minority interests [PATAMI] which is later used to calculate earnings per share [EPS]. But for the company, the person added that you need to look at the profits before tax and zakat as this will give clearer view of the company's financial highlights.

KPJ Healthcare Expansion Plan

Some of the projects in the pipeline include:

#	Project	Total Capacity	Estimated Completion
1	Muar, Johor	120	2QFY14
2	Rawang, Selangor	159	2QFY14
3	Tg Lumpur, Pahang	160	2015
4	Perlis	90	2015
5	Bandar Dato’ Onn, Johor	390	2015
6	K/Bayuemas, Selangor	200	2016
7	Miri, Sarawak	120	2016
Total		1,239	-

Source: CIMB Research, March 12, 2014

Whether or not you want to buy or sell the stock, you should do your own research and exercise your own judgment.

This posting is not a recommendation to buy, hold or sell stock related to the company mentioned here.

This posting is my own reflection and analysis of what transpired at today's event.